Honda's Offshore Expansion Program

Honda Motor Co. Ltd the world’s largest engine manufacturer and second-largest Japanese automaker has announced recently their latest growth strategy which will increase its car production capacity in India and Thailand while at the same time opening a new plant in Argentina.

The said move is aimed to compensate the dwindling domestic demand. According to Honda President Takeo Fukui in an interview with reporters recently, his company will invest 230 million US dollars for the construction of its second car assembly plant in India. Honda aims to triple production capacity there to 150,000 vehicles annually.

Aside from India, Honda the producer of high quality Honda parts is also planning to double its car production capacity in Thailand to 240,000 a year hopefully to start by the second-half of 2008. To achieve this objective, the Japanese automaker would have to build a second assembly plant in the country that would cost the company of around 23 billion yen.

The new plant will be built in Thailand’s Ayutthaya province. The plan of a second Honda car assembly plant in Thailand came after the Thai government has announced its decision to offer tax incentives to investors who are willing to produce eco-friendly, small, fuel efficient vehicles for both domestic and export markets.

According to Takashi Nagai, Executive Vice President of Asian Honda Motor Company, "By combining our support for the Eco-Car policy with our original plans, Honda has decided to dramatically increase our total investment in the project to approximately 6,200 million baht, the largest single investment in Thailand to date."

Honda’s investment announcement has also enabled the Japanese automaker to obtain from the Thai government privileges in the Eco Car project.

All of Honda’s plans of constructing additional assembly plants in Thailand and India are geared to increase capacity in Asia same with the company’s earlier announcement that it will spend 100 million US dollars for the construction of a new assembly plant in Argentina which will focus in meeting the growing demand in South America.

The facility which will be constructed in Buenos Aires province will start in 2009 and is expected to give an annual output capacity of 300,000 compact passenger vehicles that is according to the statement released by the company.

The new plant in Argentina will become Honda’s second auto production structure in South America aside from a Honda factory in Brazil. The Japanese automaker also has a motorcycle plant in Buenos Aires province.

Honda President Fukui after announcing its offshore expansion program has refrained from mentioning what its plans are for its home market where demand for new vehicles have been dwindling.